More on Claiming-race Taxation

A couple of followup points re my post on claiming-race taxation.  One, my friend Scott tells me that he has heard--though he admits he has no confirming source--that Castro offered such a deal to the multinationals operating in Cuba in 1961,  If true, I suppose it is documented in the literature, though neither Scott nor I has troubled to track it down.
 
Two, Underbelly's Wichita Bureau points out that it's just a species of the standard buy-sell agreement, familiar to anyone who ever drafted the paperwork for a partnership business: either party can name the price at which the other can buy or sell.
 
And three,  now that I think of it, they are all variants of "one cuts, the other chooses," for splitting, say, a pastrami sandwich.  I think you can even generalize it to a situation where there are seven or eight people around, say, a pizza.  One guy cuts.  Everybody else (in turn) gets to take or pass; if nobody takes, then the cutter is stuck with it.

There must be more. Hey, I smell dissertation topic!  But it's probably already been written.

Claiming-race Taxation

I'm very far from being an expert at this sort of thing but I think I understand the bare mechanics of a claiming race. You enter your horse at a declared value and somebody, more or less anybody, has a right to buy at that price. Best way I understand, it is a way of keeping the owner from trying to slip in a ringer: he lowballs the value, he risks losing the horse.

I had a friend back in Kentucky who said we ought to use that device for value-based property taxation: the owner gets to declare its value and the sovereign can tax at that value, or buy at that price.

It struck me as an interesting idea though but while I can't say I've searched very hard, I've never before found anyone who took it very seriously (just now I tried it on a couple of my taxy friends who seem not to have given it any thought).

But maybe I have a contender. The subject for the moment is “sound dues.” We're at Kronberg Castle, facing out from the coast of Denmark towards Sweden just four miles away. The “dues” are the customs duties that the King of Sweden extorted collected from passing ships, starting in the 1420s and continuing until 1857 (the Americans bullied him out of it).

You can see where this is going. So I'm told (I haven't seen a written source), the system operated on the principle of the claiming race. The captain would declare the value of his cargo; the king could tax or buy. I don't know any of the details: how long the system lasted; how many times the King exercised his right; how much money he made—nor, indeed, whether the story is a total fairy tail (the Danes do have a history with fairy tales). So, claiming-race taxation on the sound. There must be a whole literature out there that I haven't discovered yet but I must say I find the idea highly intriguing.

Grr

The IRS' online tax-pay systems seems never to have heard of the quarterly estimated income tax.  Too bad I didn't owe the excise tax on greenmail; that, they would have let me pay.

[I suppose I've fussed about this before but I still marvel: the State of California seems to have figured out how accept online payments years ago.  With the IRS, every year I try and every year I give up and mail 'em a check.]

Non-Tax Taxes and Tax Non-Taxes

Not sure that two or three swallows make a summer but I notice an interesting blip of curiosity in my newsfeed on the issue of "tax expenditures"--bennies that arrive in the form of deductions from income rather than tax-and-spend.   There's nothing remotely new about the topic, of course, and I may be the only one raising an eyebrow over the fact that it seems to be getting a bit more-than-usual attention just now.  But to my point--here's Mike Konczal taking the long view, showing how the tax expenditure idea gained traction on the right all the way back in the Reagan administration.  Konczal is picking up on an air-clearing Bloomberg analysis;  also some characteristically acerb comments by Will Wilkinson.

Meanwhile Ezra Klein picks up on a promising recent study("Marron and Toder")  addressing a threshold question: just what counts as a tax expenditure?  Per Ezra, we are to distinguish between "“spending substitutes” and “tax policy design.”  Per Klein:

The tax policy expenditures “represent broad choices in tax policy design but are not associated with any clear spending objective,” according to the study. Marron and Toder cite the treatment of qualified retirement saving plans, which, for good or ill, nudges the tax code toward taxing consumption rather than savings.

Other expenditures, however, are simply government spending programs by another name. The mortgage-interest deduction, for instance, is a spending substitute: it seeks to “subsidize identifiable activities” — homeownership in this case — and could easily be designed as a spending program in which the government sends homeowners an annual check.

 I probably haven't given the matter enough thought but I am not at all sure that this works.  For example, Maron and Toder think of the mortgage interest deduction as a "tax expenditure" because it subsidizes home ownership.  Well maybe, but as many have observed, the thing about the mortgage interest deduction (and its ilk) is that it is so weirdly selective in dispensing its bounty.  There is simply no reason to believe that we ever could (or should) embrace a "housing subsidy expenditure" program that deliberately skewed all its benefits to the rich and well connected.  Here's Travis Waldron making the same point on steroids.

The topic so far has been the question of when a deduction is really a tax.  You might well frame the question the other way around: when is a tax really not a tax?  Many (=I) have made the point that Scandinavians appear to regard their tax system as a kind of buying club, where they band together to join the market for goods and services they would buy anyway--only perhaps with more market power, able to achieve economies of scale.  In the US we talk about how we could do more of that if we put some serious backbone into government-sponsored health care; apparently it is not our concern. Local governments also: people struggle to get into fancy suburbs where they will have the privilege to pay high "taxes" for the services they desire.  In the same vein, Californians have learned lately to their cost that when the government stops paying for something, you may have to pay for it yourself--without the solace of a deduction for the payment of a "tax."

We are the 21.5 Percent

Like (I suppose) taxpayers everywhere, I gobbled up James B. Stewart's New York Times story this morning on his personal taxes: Stewart says he paid "24 percent of [his] adjusted gross income in federal taxes," and "49 percent of [his] taxable income in federal income tax" (note the inconsistency in wording--"federal taxes" versus "federal income tax").

Naturally I hauled out our (sic) own return for a comparison, and there are some surprises.  I see that we  paid about 21.5 percent of adjusted gross in federal income tax.  I guess this is the one to compare with Stewart's 24 percent (or is he including, e.g., Social Security as a "tax"?).

Also if I add this up right, we paid only 25 percent of taxable income in federal income tax, versus Stewart's 49 percent--and I haven't a clue why our number is so much lower than Stewart's [But see infra--ed.].  I should have thought that Stewart and we were mostly alike in that most income, in both cases comes from evasion-proof sources like salaries, pensions etc.  Idle speculation: is Stewart single? We are married filing jointly, which I assume translates into a lower rate.

Another puzzle: Stewart says he gave 25 percent to charity. This is eye-popping at least in the sense that I thought we were generous but we don't come close to that.  Anyway, you would assume that the bigger the slug of charity money the smaller the tax bill, which is another reason why it is hard to figure Stewart's 49 percent.

We also paid another six percent in California state income tax, but no local income tax.  I take it poor Stewart pays 13 percent in combined (New York) state and local income taxes; also something called the "unincorporated business tax" which sounds like a very expensive insult. 

Yep, I'd sure rather be in the Mitt Romney 13.9 percent bracket.  But as I suggest, I'm a little surprised to find that our overall rate is as low as it is.  And the truth is, I have never felt myself overtaxed.  Sure, the government spends money on all sorts of lunatic adventures that I'd like to stomp in their cradle.  But nothing is free and I am with Oliver Wendell Holmes when he says that taxes are what we pay for a civilized society.  Well, semi civilized. Some of he time.  

  Afterthought: Oh, maybe I do get it.  If he has huge deductions from AGI, he ends up  with a comparatively low taxable income, but a humongous alternative minimum tax.

What Does it Mean to Say that "Corporations Are People"?

Some lefties hoot at Mitt Romney for saying that  "corporations are people."   Others say it's cheap shot.  I  lean towards the cheap shot faction.  Taken in context, he wasn't saying much that was very controversial, or even interesting--i.e., he was saying that in the end, the tax on the corporation ultimately comes out of the pocket of some human being.  His mistake was that he said it in the kind of MBA jargon which usually protects him via its implacable dullness-, but this time transmogrified him a moment of harmless merriment.  The charge sticks to him (if it sticks at all) not because it is true or even important, but because it crystallizes something we already believe and already dislike about him--like Al Gore and the internet, or Michael Dukakis and the tank. In Romney's case, the insight bears the suggestion that people are not people, which is precisely what his critics think he may in fact believe.

But what I'd really like to know his just what, in detail, Mitt Romney really believes about the people-ness of corporations?    Nobody (I think) believes that "corporations" are "people" in every way.  E.g., illegal to murder them?  to abort them after they become viable?--etc.  I think I know the correct answer to those questions; meanwhile  I have been telling my bankruptcy students for years that the buzz the hear in Palookaville on a hot August night is not, in fact, a cicada infestation; rather it is the souls of undead corporations that have been abandoned but never terminated, seeking their final home. I sometimes get a laugh for this one.


 Some people--unfortunately, some people with robes, believe that corporations are people to the extent of enjoying First-Amendment rights.  Me, I'm one of those who thinks the whole thing is a wild hare.  I think Citizens United, the free speech case, was a terrible decision--it is people and not corporations who have a just claim on First-Amendment rights.  The corporation is a convention, and a distraction.


 But for the same reason, I'd get rid of the corporate income tax--shifting the burden over to the individual investors.  I concede there is a whole thicket of sub-issues there as to just what gets shifted and how.  But I think that shifting the tax to the investor at least clarifies the point that it is the investor and not the corporation who is a "person."

Would Mitt Romney agree?  Of course not.  When he (or any other GOP Presidential candidate) talkes about getting rid of the the corporate income tax, he doesn't have the slightest intention of trying to replace it with anything comparable but more coherent.  He's just saluting the GOP gonfalon of never paying for anything, ever.     When he says "corporations or people," the unspoken corollary is "and people shouldn't have to pay taxes."

So if Romney really wants to treat corporations as "people," I'd say he's still got some work to do.  But he's a bright guy, and he can afford good staff; any day now he may be telling us how the souls of corporations are eligible for retroactive baptism.  But get your money in front, guys; remember that it is Republicans we are dealing with here.

Bagehot Envies American Fiscal Rectitude

Walter Bagehot, marveling at the persistent habit of the United States government to run budget surpluses, laments that it's not likely to happen in his own  country:

No one who knows anything of the working of Parliamentary Government will for a moment imagine that any Parliament would have allowed any executive to keep a surplus of (United States) magnitude. In England, after the French war, the Government of that day, which had brought it to  happy end, which had the glory of Waterloo, which was in consequence  exceedingly strong, which had besides elements of strength from close boroughs and Treasury influence such as certainly no Government has ever had before--that Government proposed to keep a moderate surplus and to apply it to the reduction of debt, but even this the English Parliament would not endure.  The administration with all its power derived from both from good and evil had to yield; the income tax was abolished, with it went the surplus, and with the surplus all chance of any considerable reduction debt for he time.  In truth, taxation is so painful that in a sensitive which has strong organs of expression and action, the maintenance of a great surplus is excessively difficult.  The opposition will always say that it is unnecessary, is uncalled for, is injudicious; the cry will be echoed in every constituency; there will be a series of large meetings in the great cities; even in the smaller constituencies there will mostly be smaller meetings; every member of Parliament will be pressed by those who elect him; upon this point there will be no distinction between town and country, the country gentleman and the farmer disliking high taxes as much as any in the town. To maintain a great surplus by heavy taxes f debts has never yet in this country been possible, and to maintain a surplus of the American magnitude would be plainly impossible

 So Bagehot in The English Constitution 52 (Dolphin ed.).   He goes on to say that "in reality, America is too rich, daily industry there is too common, too skilful, and too productive, for her to care much for fiscal burdens." 

The IRS Doesn't Want me to Pay my Taxes

I don't know about you, but I've always found quarterly estimated tax payments to be a bleeping nuisance.  It's not really the money: I'm a fairy docile taxpayer.  I've always shared the view of the crusty New England libertarian that "Taxes are the price we pay for a civilized society;"* hell, I have been known to err on the side of overpayment.

But those quarterlies--I have never yet invented a system that guarantees I will remember (a) the due date; (b) the amount due; (c) where I  stowed the paperwork; and, yes, (d) whether I have already paid them.  Huff, puff.  Grump.  Grrr.

Just lately I went in quest of the universal solvent--online payment.  Dealing with my State taxes, I found, to my pleasant surprise, that the State of California was ready, willing and able.  I glommed onto a user name and password just about the same way as I would at any commercial site; I logged on and made a payment, and I said yes, I would be most pleased if they would henceforth send me reminders (if I am conscientious, I will log on at my bank today to make sure it is posted).  I don't know whether this is "secure" or not--I suppose not--but if anyone wants to hack my account for the purpose of helping me to stump up, they should feel free.

But the Feds.  Ah, the Feds.  First, they don't want just a user name and password; they want user name and PIN and password.  More: they mail you the PIN, then you have to phone for the password.  When you finally get around to signing you find yourself being warned that you are  now being transferred to some other arm of the Federal government which may have different policies and that if I want that okay but it's my funeral.   Like virtually every other internet user, I ignore the warning text, then check the box saying that I have not ignored it, and then proceed to ground zero--the site for online payment.

But wait--quarterlies aren't there.  Or I can't find 'em.  Some taxes are listed--some I've never heard of and am delighted I do not have to pay.  But after doodling around for a few (more) minutes, I chucked it all, pulled out my paper checkboook (I still have one), found the tax paperwork (glory be!), went and stole a stamp and envelope from Mrs. B, and posted the payment.  Notice to the boys in the mailroom: those bad vibes have nothing to do with the tax itself; they are all about the nuisance of payment.

I suppose I might be missing something here--I am an old guy, I am not supposed to understand computers.  But my friend Taxmom, who lives with this every day, seems to believe I am on the right track:

Yes, the State has done a great job of streamlining things.  Fed is driving us up a wall b/c they require online payment for certain things, yet make it prohibitively difficult to arrange that payment.  We've seen the FTB (CA) be proactive in other respects as well....for instance they like most correspondence / forms submitted by fax these days, instead of reg email, also greatly streamlined the corporate revivor process (FTB handles finances of this even though it is a Sec of State issue) which used to be a nightmare.

Go California!

===
*He also said "get down, you fool!" 

Why Do We Tax Public Employees?

A while back I had a borderline-civil exchange with another blogger over the voting rights of public employees--should they be allowed to vote or do they just have too much at stake?  I can understand the argument that they should not be able to vote but it proves too much: every government contractor, every lobbyist, every beneficiary of a public program, has some kind of stake in government decisions and if we deny them all, then nobody is left.

But it occurs to me that you can turn the point around.  Forget about voting, why do government employees pay taxes?   It's certainly not an impossible idea; we already forgive taxes for soldiers in the combat zone.  No quarrel in principle here, but why not extend it?  Understand, I don't mean to offer them a break here: just net out their salary against their potential tax bill.  If they would have the right to $100 in income with s 30 percent tax rate, then just pay them $70.


I admit that there is something creepily unsettling about the proposition, yet for the life of me I can't think why.  What am I missing?

Afterthought:  It occurs to me that the proposal comes tantalizingly close to a system of corvée.  Maybe that's the point of  the tax exemption for people on active duty: active duty also looks like corvée.

Rich People Who Want to Pay More Taxes

Joel flags us to this Dana Milbank piece about rich people who want to pay more taxes.

"I'm in favor of higher taxes on people like me," declared Eric Schoenberg, who is sitting on an investment banking fortune. He complained about "my absurdly low tax rates."

"We're calling on other wealthy taxpayers to join us," said paper-mill heir Mike Lapham, "to send the message to Congress and President Obama that it's time to roll back the tax cuts on upper-income taxpayers."

"I would with pleasure sacrifice the income," agreed millionaire entrepreneur Jeffrey Hollender.

The rich are different.

In another era, the millionaires on Tuesday's conference call might have been called "limousine liberals." But that label no longer applies. Now any wealthy liberal worth his certified-organic sea salt is driving a Prius.

It's a fine piece in its own right but it might be fun to put it in a larger context. It is possible to identify other instances in other times and places when people willingly queue up to make a private sacrifice for a larger social good. I'm working from memory here so I'll get the details wrong but I think I have the essence right, so consider:

I think it is John Lukacs who tells the story of the old Philadelphia lawyer who said that in paying taxes he liked to err on the side of overpayment because it was part of the privilege of living in a civilized society.

Wasn't it Rousseau who said that people ought to pay for the opportunity to join the army because it was such an honor to serve the community in that way? And isn't my memory correct that subalterns in the British Army in WWI died at a higher rate than enlisted men? [I guess I'm drifting now but I'm similarly fascinated with the data on how in the sinking of the Titanic, it really was a case of women and children first--see link].

More: as I remember Ed Banfield and James Q. Wilson in their seminal studies of cities, pointed out that upper class voters were more likely to vote in favor of bond issues than lower; even if for, say, parks in lower class neighborhoods (I'll bet there are other studies on point, they just don't come to mind at the moment).

I suppose a crude Benthamism would find this implausible; would believe that anyone would be a shirker or a holdout if he could. But I don't think the evidence points that way. I suspect it is rather a matter of whom we feel deserves our loyalty. I'd certainly begrudge every penny of taxes I paid to Kim Yong-il. By contrast the Scandinavians don't seem to mind p-- well, of course they mind, but not all that much. Meanwhile, there is a segment of the population that will tithe to the church even while avoiding every penny of "Caesar's" tax they can. And I suppose there are places where, when you come home after serving your sentence in prison for tax evasion, they'll hold a parade.

Does my government deserve my loyalty? Sure. But there are lots of times and places when I would cheerfully wring their collective neck. And I must say I admire--not the generosity so much as the clear-headedness--of people like Schoenberg and Lapham who recognize that they've got a pretty good deal.

Afterthought: Joel tosses in:

Never let the revenooers know anything. Pay cash, keep your lips closed, put nothing through banks that does not appear later in tax returns - pay taxes greater than your apparent standard of living and declare income accordingly. We had been audited three times since Mama died; each time the government returned a small 'overpayment' - I was building a reputation of being stupid and honest.

That's Robert A. Heinlein, The Number of the Beast 78 (1980).

Some Clarity on Taxes

Tom, Schaller, fisking Jonah Goldberg, takes time to introduce some useful clarity into the debate over the taxes we pay. He works off this familiar OECD chart, and adds conceptual commentary. Specificlly, that bar showing us as fifth lowest in tax burden among the relevant subset--does it include state and local? Schaller specifies: yes, it does. Also this handy line graph, hammering home the points that (a) overall tax burden has remained pretty steady for a generation; and (b) it's Social Security/Medicare that have seen dramatic increases.

Another thought about the bar graph: I'm impressed at how most of the high-tax countries are those that we think of as comparatively well-governed--not just in terms of "social services," but in terms of more general measures of social capital--transparency, trust--and I believe also voter contentment. I guess I'm thinkin' Scandinavians now, and I pretend to ignore Iceland. Is Italy an exception? I love to travel in Italy but I tend to think of Italy as one of those places in which taxation is a form of licensed looting.

But at the other end of the scale. bracketing the United States, I find Japan and Switzerland--two countries that seem about as well governed as any on the list. So maybe it is difficult to draw any firm conclusions about the relationship of taxes and good government. On the other hand, I suspect that not many people would find themselves better governed in Mexico (the bottom of the last) than they would be in Sweden (the top).

Don't Raise the Bridge, Lower the River

Pete Davis has found the culprit: the "subsidy" (as he calls it) of corporate debt via the deductibility of interest paid by corporations.

The corporate income tax deduction for interest produced a -6.4% tax rate on debt financed investments, while the double taxation of equity income (dividends and capital gains) produced a 36.1% tax on equity financed investments according to this 2005 Congressional Budget Office study. See Table 1. That negative tax rate is the root of the fiscal crisis. Taxpayers paid a large subsidy for Wall Street investors to take those risks.

It's a respectable point, for the presentation is remarkably unsophisticated for so sophisticated a website. Anyone who cares enough to read either this post or the original will see the problem: why do we tax any returns on corporate investment at the corporate level rather than simply taxing the recipient. And more precisely, why do we let debt go free while taxing (i.e., t the corporate level) returns to equity? There is a huge, incoherent inconsistency here, but we could get rid of that by simply abolishing the taxation of "profits," aka returns to equity, i.e., abolish the corporate income tax.

The whole topic is (like, I suppose, anything in taxation) a dog's breakfast. Other people know this far better than I but I take it that our attitude is rooted in the idea that (a) a corporation is a "person;" and (b) payments to debt are an "expense" rather than a return on capital. Both of these ideas seem to me to be wrong; the second, egregiously wrong. Still I have to admit that on my list of curable evils, the corporate income tax does not have a high priority. Indeed if we are doing away with inconsistencies, I'd far rather get rid of the personal mortgage interest deduction which I suspect has done more harm than the corporate.

Idle Afterthought: So many people have had their knickers in a twist over corporate personhood since the decision of the Supreme Court in Citizens United v. the Federal Election Commission, sanctifyng corporate spending in election campaigns. I wonder, as to those who decry the idea of corporate personhood that underlies Citizens United--would they agree also that (since a corporation is not a person) it shoud not be taxed?

Today's Factoid: Fiscal Integrity among the Weasels

The argumentative among us might like to comment this to memory (link):

Let's pick ten Republican or near-Republican senators typically called "moderates" (some of whom have retired since 2003): Collins, Domenici, Grassley, Gregg, Hatch, Snowe, Specter, Voinovich, Nelson, and Lincoln. Only two of them (Blanche Lincoln and Judd Gregg) opposed the unfunded Medicare Part D. Only one of them (Olympia Snowe) opposed the 2003 tax cut, even though it was very clear at the time that permanent (as opposed to temporary recession-fighting) tax cuts were the last thing that America needed. And none of them opposed the 2001 tax cut--even though Alan Greenspan was at the time wandering around Capitol Hill whispering that it was bad policy, and that we were very likely to rue the day it had passed.

To my own surprise, this actually makes me think a bit more highly of Blanche Lincoln and Judd ("Acne") Gregg. And of course, an idea has a truth-value that is independent of the character of the lying, hypocritical weasel who endorses it. But when these guy tell you they've always been deficit hawks, keep this list in mind.

Now, I Ask You....

... is there anything on this list to which any serious policy wonk could possibly object (link)? Remarkable how straightforward and intelligible all this seems, and how difficult it is to get it into the public forum. HT: Bruce Bartlett.

Summers on VAT

This is apparently a few years old, but it's new to me, and it made me laugh:

There is an oft-repeated saying about the VAT made by Larry Summers back in 1988. The reason the United States doesn't have one, he said, is because conservatives view it as a money machine and liberals see it as a tax on the poor. We will have a VAT, Summers predicted, when liberals figure out that it is a money machine and conservatives see that it is a tax on the poor.

So Bruce Bartlett in The New American Economy, citing Jan M. Rosen in the New York Times, Dec. 19, 1988.

More Stuff I Think I Know About Taxes

Some more things I know about taxes, I think:

• “Flat tax” can mean at least three different things:

--A single rate (18.2 percent?) for all income-tax payers.

--A “flat base,” with all deductions, exceptions, exclusions, etc., boiled out.

--A retail sales tax (or a value-added (“VAT”)) with a single rate for all transactions.

• One thing it (almost) never means is a single lump-sum payment for each and all potential taxpayers—in effect, a poll tax. But if you did have such a tax, it would be about $5,600 per person. That’s what you get when you divide the current income tax bill by the number of adults in the population.

• A “single-rate” flat tax would on almost any plausible scenario reduce the taxes on the rich and increase the taxes on the poor. For example, using 2005 data, for a family of four, a “single rate” tax of 18.2 percent, supplanting a graduated income tax and getting rid of tax credits and alternative minimum tax—would reduce taxes for all those with incomes over $144,000, and increase taxes on all others.

It occurs to me you aren’t likely to hear much about these tax issues in this election year, or at least not in this traditional form. Re the single-rate flat tax, my guess is that most voters have figured out at this point htat it is a scam perpetrated by Steve Forbes to maintain his 151-foot yacht. Re getting rid of exceptions--one of the most desirable targets is the home mortgage interest deduction, and that has absolutely no chance of being eliminated in this rotten market. Re sales taxes or VAT, the biggest argument in their favor is that they increase savings. Personal savings are indeed near zero, but in a world clogged with surplus capital, the idea of promoting more savings just doesn’t seem to have a lot of traction.

Source: Still reading Joel Slemrod and Jon Bakija, Taxing Ourselves (4th ed. 2008)

Update: Good stuff om taxes in the current presidential campaign here.

Some Things I Know About Taxes, I Think

Some things I know about taxes, I think:

• In the USA, we paid 27.5 percent of GDP in taxes (including social security as a “tax”) in 2005, of which about two thirds (18 percent of GDP) was federal, the rest state and local. That is lower than any other comparable “first-world” country except Japan. The OECD average was 35.9 percent; Sweden was 50.4 percent. The federal tax number has hovered with remarkable stability around 18 percent of GDP for more than half a century.

• By some non-crazy Office of Management and Budget estimates, social security plus Medicare and Medicaid are due to eat up about 17.8 percent of GDP by 2040 (mostly medical; social security alone is not a huge problem). Interest on federal debt would grab another 12.1 percent. The OMB numbers project total government spending for 2040 at 39.5 percent—still well below Sweden, but enough (at current tax rates) to imply a deficit equal to 21.7 percent of GDP. A train wreck.
  

• As a percentage of cash income, the average taxpayer pays 21.3 percent of cash income in federal taxes—again, including social security. Contrary to widely held belief, the richest actually do pay most—the top one percent of earners pays at a rate of 30.8 percent (but that one percent also got 10.3 percent of all the Bush II tax cuts). The lowest earners actually receive money via the income tax, thanks to the earned income tax credit, but they pay taxes when you add in social security.


• It’s an axiom of economics that people respond to incentives. In fact, the modern history of taxation provides at best weak evidence for this proposition. People do seem to respond to highly publicized, high-saliency changes in the tax laws—quite a bit of money shuffled around as investors tried to avoid the impact of the Tax Reform Act of 1986. But in a great many cases, the incentive effect is non-existent, or so swamped by other effects as to be imperceptible. The supply-side mantra that we can tax-cut our way to wealth—appears on the all the evidence to be a fantasy.
  
  
• On tax evasion: reported net income as a percentage of true net income—for wages 99 percent, pensions 98 percent. Non-farm proprietors, 43 percent, farm proprietors, 28 percent. As a wage-earner and pensioner, I can get pretty steamed about these numbers. On the other hand, I have the police to collect my salary; they have to hustle for theirs.

--Source: Joel Slemrod and John Bakija, Taxing Ourselves (4th ed. 2008)

Fn.: In the same vein, see this but I do my best never to wear socks.